Late, later, latest on Boeing 787 output

Aircraft maker puts new manager in charge, but task might challenge even Superman

Supplier and technology snafus put the Dreamliner more than three years behind schedule.

It will take more than a management shuffle to restore Boeing Co.'s shattered credibility as it strives to crank up production of the 787 Dreamliner, its hot-selling but long-delayed new passenger plane.

With glitches and gremlins galore, the plane is arriving more than three years late. Schedule after schedule has been trashed as it became clear Boeing didn't have a firm grasp of its far-flung suppliers or the finicky composite material that makes the plane so light and fuel-efficient.

After finally delivering the first five planes in the past five months, Boeing says it aims to deliver 787s at a rate of 10 a month by the end of next year. It delivered two in January and none in February. Meeting that goal is hugely important to Boeing and its airline customers, which are starting to demand billions of dollars in late penalties to compensate for not having the fuel-efficient plane as oil prices rise.

Though Boeing isn't talking much, analysts say the latest misstep at least partially explains why new management was brought in just days ago to oversee Dreamliner production.

But the question is whether anyone—even Boeing's most-seasoned expert at speeding up aircraft production—can quadruple output in less than two years when so much depends on an army of subcontractors and their suppliers, not to mention the unknown problems that crop up with any new airplane, particularly the groundbreaking 787.

“I used to be a believer, a true believer,” says Rick Whittington, an aerospace analyst at Drexel Hamilton Inc., an investment research firm in New York. “Will this solve the problem? I'm from Missouri now.”

Despite his show-me philosophy, he rates the stock a “buy” for Boeing's strengths in other areas. The Chicago-based aerospace giant posted earnings of $4.01 billion last year, up 21 percent, on revenue of $68.74 billion.

Larry Loftis, who transformed the assembly lines for the 737 and then the 777, Boeing's two best-selling planes, was put in charge of the 787 on Feb. 24. He swapped roles with Scott Fancher, who ran Boeing's missile defense business before he was brought in three years ago to get the 787 back on track. As vice president and general manager of the 777, Mr. Fancher will help design a next-generation model of the popular widebody plane. Neither was available for comment.

The management changes are “intended to better align our organization for the challenges ahead,” according to a statement by James Albaugh, president and CEO of Boeing Commercial Airplanes. “As this program transitions into production, this appointment will take advantage of Larry's more than 32 years of commercial product experience and knowledge of Boeing's production system.”

Boeing is taking other steps to hurry production along. It is opening a second 787 factory this summer in North Charleston, S.C., its first outside the Seattle area, but it remains to be seen if a new workforce can meet the production target of three planes per month. And in June it plans to open a duplicate assembly line adjacent to the existing 787 factory in Everett, Wash.

Theoretically, those three facilities could produce 13 planes per month. But Mr. Loftis needs Boeing's suppliers, currently producing parts and components for about 3.5 planes per month, to keep pace with demand without creating bottlenecks.

Analysts are unsure what exactly triggered Boeing's shake-up. Apparently the shift was in the works well before it was discovered last month that improper joint fittings were damaging the fuselage, creating another two-week delay for each of roughly 55 partially completed planes, which must be inspected and fixed.

Some analysts think the switch was chiefly motivated by Boeing's need to revamp the 777 as its European archrival Airbus develops a new widebody in the same class. Mr. Fancher's knowledge of the 787's carbon composite parts suppliers would be crucial as Boeing decides whether to design a new plane or use more composites to make the 777 more fuel-efficient.

“This will allow us to take advantage of Scott's vast experience on development programs and allow him to align the 777 production system with the next generation 777,” according to Mr. Albaugh's brief announcement.

But more analysts point to the 787 as Boeing's biggest challenge right now.

“Either the supply chain is ready or it is not, and we will know soon enough,” says Carter Leake, an aerospace and defense equity analyst at BB&T Capital Markets in Richmond, Va. “All the Tier 1 suppliers have their game face on, but it appears to most on the Street that Boeing is setting itself up for yet another disappointment.”

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